Seven Ways to Increase Debit Card Profitability - Indiana Bankers ...
1
7 Ways to increase
Debit Card Profitability Presenter:
Mike Holt
2
HELPING GOOD BANKS GET BETTER
3
4
Seven Ways to Increase Debit Card Profitability 1. Interchange Network Arrangement
4. Marketing and Rewards
Optimize your interchange network arrangement components – SIG Brand, PIN POS and ATM – to set the foundation of earning
So, the interchange foundation is set and our performance metrics are established. How do we improve our performance?
2. EFT System
5. ATM...
This could be listed as “1.a” with your network arrangement, as it is nearly as important since it is the card portfolio’s foundation of cost
Your ATM network is a loser, but a permanent fixture and necessary customer service. Let’s ensure that it will earn.
3. Portfolio Performance
6. Understanding Fraud
Now that you’ve ensured the strongest foundation for profitable interchange, the next step is establishing a system of measurement
Please don’t brag to me about having completed your EMV project, unless you really enjoy doubleedged debates with no identifiable resolution.
7. Profit and Performance Tracking How will we be able to show our employees, boss or board members how much we’re improving the bank if we aren’t tracking it.
5
Current Trends: Transaction Growth Declining
Chart from the 2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions report released by the Board of Governors of the Federal Reserve System
6
Current Trends: SIG to PIN Shift
Chart from the 2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions report released by the Board of Governors of the Federal Reserve System
7
Current Trends: Transaction Fraud Changing Major changes post-EMV • 2017 liability shift date moved to 2020 for automated fuel dispensers and ATM.
• CNP (card not present) fraud already on rise while counterfeit fraud declines. • Canada’s CNP fraud shift since 2008 – nearly 90% CNP as of Q3 2016. • Text alert compliance dates for both Visa and MasterCard have come and gone
8
1. Interchange Network Arrangement
9
Interchange Network Components
SIG Network / Card Brand
PIN POS and ATM
Impacts all transaction types
Brand unaffiliated
10
Optimize SIG Network Relationship
Brand Agreement Enhance profitability by 25%+ 01
Principal Membership
02
Understand the Components 03
SIG Income (as basis points of sales volume): Gross SIG interchange income - SIG expenses [processing + pass thrus] Net SIG interchange income (Target: 100-115 bps)
11
Fed Study - Average Debit Card Interchange Fee by Payment Card Network updated Aug 2016
12
Optimize PIN POS and ATM Arrangement
Only ONE Unaffiliated Network
Optimal PIN POS NBR = $0.18 - $0.24
Evaluate and Negotiate
Not including PAVD
Various types of incentives
Understand Profit On top 8 merchant categories
13
Fed Study - Average Debit Card Interchange Fee by Payment Card Network updated Aug 2016
14
2. EFT System
15
EFT System
SIG transactions
PIN transactions – POS
PIN transactions – ATM
• SIG auths • SIG posts • EMV transactions
• PIN auths • PIN posts • EMV transactions
• ATM – terminal and foreign • ATM driving and network connectivity • Software updates and one-time fees
Fraud
Pass-thru & Gateways
Reporting, misc.
• • • •
• Network gateways • Brand, PIN network pass throughs • Membership fees, etc.
• EFT reporting • Card file and BIN fees • Other misc.
Fraud monitoring, system Disputes and hot card Text alerts EMV misc.
16
EFT System Components and Ancillary Fraud extras, reporting extras, etc. • Costs should be < $15 per active card;
7 Ways to increase
Debit Card Profitability Presenter:
Mike Holt
2
HELPING GOOD BANKS GET BETTER
3
4
Seven Ways to Increase Debit Card Profitability 1. Interchange Network Arrangement
4. Marketing and Rewards
Optimize your interchange network arrangement components – SIG Brand, PIN POS and ATM – to set the foundation of earning
So, the interchange foundation is set and our performance metrics are established. How do we improve our performance?
2. EFT System
5. ATM...
This could be listed as “1.a” with your network arrangement, as it is nearly as important since it is the card portfolio’s foundation of cost
Your ATM network is a loser, but a permanent fixture and necessary customer service. Let’s ensure that it will earn.
3. Portfolio Performance
6. Understanding Fraud
Now that you’ve ensured the strongest foundation for profitable interchange, the next step is establishing a system of measurement
Please don’t brag to me about having completed your EMV project, unless you really enjoy doubleedged debates with no identifiable resolution.
7. Profit and Performance Tracking How will we be able to show our employees, boss or board members how much we’re improving the bank if we aren’t tracking it.
5
Current Trends: Transaction Growth Declining
Chart from the 2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions report released by the Board of Governors of the Federal Reserve System
6
Current Trends: SIG to PIN Shift
Chart from the 2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions report released by the Board of Governors of the Federal Reserve System
7
Current Trends: Transaction Fraud Changing Major changes post-EMV • 2017 liability shift date moved to 2020 for automated fuel dispensers and ATM.
• CNP (card not present) fraud already on rise while counterfeit fraud declines. • Canada’s CNP fraud shift since 2008 – nearly 90% CNP as of Q3 2016. • Text alert compliance dates for both Visa and MasterCard have come and gone
8
1. Interchange Network Arrangement
9
Interchange Network Components
SIG Network / Card Brand
PIN POS and ATM
Impacts all transaction types
Brand unaffiliated
10
Optimize SIG Network Relationship
Brand Agreement Enhance profitability by 25%+ 01
Principal Membership
02
Understand the Components 03
SIG Income (as basis points of sales volume): Gross SIG interchange income - SIG expenses [processing + pass thrus] Net SIG interchange income (Target: 100-115 bps)
11
Fed Study - Average Debit Card Interchange Fee by Payment Card Network updated Aug 2016
12
Optimize PIN POS and ATM Arrangement
Only ONE Unaffiliated Network
Optimal PIN POS NBR = $0.18 - $0.24
Evaluate and Negotiate
Not including PAVD
Various types of incentives
Understand Profit On top 8 merchant categories
13
Fed Study - Average Debit Card Interchange Fee by Payment Card Network updated Aug 2016
14
2. EFT System
15
EFT System
SIG transactions
PIN transactions – POS
PIN transactions – ATM
• SIG auths • SIG posts • EMV transactions
• PIN auths • PIN posts • EMV transactions
• ATM – terminal and foreign • ATM driving and network connectivity • Software updates and one-time fees
Fraud
Pass-thru & Gateways
Reporting, misc.
• • • •
• Network gateways • Brand, PIN network pass throughs • Membership fees, etc.
• EFT reporting • Card file and BIN fees • Other misc.
Fraud monitoring, system Disputes and hot card Text alerts EMV misc.
16
EFT System Components and Ancillary Fraud extras, reporting extras, etc. • Costs should be < $15 per active card;
